There are around 2.4 million children living in families with problem debt in England and Wales. Children living in families with problem debt are 5 times more likely to be at risk of having low well-being than those not facing difficulties with debt. An estimated half a million children who live in families with problem debt have low well-being. An often-overlooked aspect of financial stress is the impact it can have on children.

Debt and poverty are associated with separate effects on children’s mental health. Children living in low income households are at greater risk of having poor mental health. Separately, the number of debt types – rather than the overall amount of debt a family has – is associated with poorer mental health in children.

Children in families with multiple debt types are at greater risk of experiencing mental health problems than children in families with fewer debt types. However, this relationship is mediated by financial difficulties and income. Thus, children in families on a high income without financial difficulties appear to be protected from the potential negative impact of number of debt types on their mental health.

Around 5% of children in households who have no difficulties with debt are predicted to have low well-being, compared to 23% of children in households who have debt with arrears – this means that children in households who have debt with arrears are five times more likely to have low well-being than those with no difficulties with debt. Both parents and children said experiences of debt left them feeling stressed, anxious and depressed – some parents reported specific symptoms like migraines, sleeplessness or losing weight, or had received specific treatment like being on anti-depressants.

An overwhelming sense of shame and embarrassment is felt by both parents and children – parents felt ashamed of not being able to manage money effectively; children felt embarrassed by being unable to afford normal things like their peers, and being unable to socialise. Children felt guilty, anxious and felt like failures about not being able to help their parents deal with debt – it had an impact on their confidence and feelings of self-worth.

Debt leads to arguments within families between parents, parents and children, and between siblings, leaving parents feeling like they are not in control of their lives and can’t protect their children. Debt means not being able to go on outings, taking part in activities like sports or school trips, missing out on things like birthdays, extended family gatherings or family holidays – it leaves parents and children feeling isolated and excluded; debt also means not being able to spend quality time with family members.

It is difficult to disentangle debt from other money problems as well as from other problems faced by family members, like physical health and domestic violence and existing mental health issues, all of which can further affect children’s well-being and mental health. Nevertheless, it was clear from what parents and young people told us that debt had an important impact on their lives.